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About the Financial Services Sector
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The Big Picture
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>Financial
services in Canada
>At the heart of economic life
>How the industry is regulated
>Overseeing the country's money
>Forces of change
>A new framework for
the future
>Where to get more information
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Financial services in Canada
The financial services sector in Canada is made up of several thousand
organizations — both domestic and foreign — that range
from small, localized players to huge corporations operating on
a global scale. The landscape includes:
- banks
- credit unions and caisses populaires
- finance companies
- financial planning firms
- insurance companies
- investment dealers
- mutual fund dealers
- trust and loan companies
Some institutions offer a diverse menu of services, while others
specialize in an area such as mutual funds, credit cards or corporate
financing. Over the past couple of decades, the industry has undergone
a dramatic restructuring in terms of who offers what. At one time,
banks mainly provided banking services, insurance companies sold
insurance, and so on. Regulatory barriers that restricted different
types of institutions from competing in each other's core business
have since been largely removed. Today an increasing number of players
offer many similar and directly competing products and services.
The result is greater choice and opportunities for consumers and
Canadian society as a whole. Canadians can choose from a growing
array of financial products and providers. A competitive and healthy
financial sector gives consumers improved access to financial services,
more innovative products, greater convenience and more attractive
pricing.
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At the heart of economic life
Representing 6% of Canada's gross domestic product, the financial
sector is a large and important part of our economy. Financial institutions
touch the lives of all Canadians at one time or another. The industry
is involved in virtually every transaction — raising capital,
processing payments, collecting savings, financing investment, providing
advice and managing risk. Financial institutions help people buy homes,
save and invest money, pay for goods and services, protect their assets,
plan for retirement, and manage their businesses. The sector is also
a major contributor to job creation, export growth, tax revenues and
the country's international competitiveness. (more
facts and figures…) |
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How the industry is regulated
Because of its pivotal role in the economy, payments system and management
of household savings, the financial industry is one of the most regulated
sectors in the country. Regulation is designed to ensure the integrity,
safety and soundness of financial institutions and markets. Legislative,
self-regulatory and other initiatives help minimize crises and company
failures; in addition, they protect investors, depositors and policy
holders. In Canada, there is no single body that regulates the entire
industry. It's a responsibility shared between different organizations
and levels of government. To start with, financial institutions may
be regulated at either the federal or the provincial level, or jointly.
For example:
- Banks are federally regulated.
- Securities dealers, credit unions and caisses populaires are
provincially regulated.
- Insurance, trust and loan companies, and co-operative credit
associations may be federally and/or provincially regulated, depending
on the jurisdiction under which the company is incorporated or
registered.
For institutions under federal responsibility, the Department
of Finance is charged with overseeing their overall powers —
in other words, what they can and cannot do. The Department of
Finance relies on three federal agencies to supervise the ongoing
operations of these institutions and their compliance with legislation:
- The Office of the Superintendent of Financial Institutions
monitors the day-to-day operations of institutions with respect
to their financial soundness.
- Overseeing the deposit insurance system is the Canada
Deposit Insurance Corporation, protecting deposits that
Canadians have in their federal financial institutions.
- The Financial Consumer Agency of Canada monitors financial institutions
to ensure they comply with federal consumer protection measures,
which range from disclosure requirements to complaint handling
procedures.
Links:
Office
of the Superintendent of Financial Institutions
Department
of Finance
Canada Deposit
Insurance Corporation
For institutions under provincial jurisdiction, the
province(s) in which a company is incorporated or registered is (are)
responsible for regulating the company’s overall powers. As at the
federal level, provinces are supported by agencies and organizations
that supervise the ongoing operations of these institutions. For instance,
the provinces each have a body called a securities commission or administrator,
which oversees securities dealers and the rules and laws that govern
them. This body delegates certain aspects of securities regulation
to the Investment Dealers Association of Canada,
the Mutual Fund Dealers Association of Canada and
the stock exchanges, which are known as "self-regulatory
organizations" (SROs). |
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Overseeing the country's money
In most countries, one central institution looks after the nation's
money supply and management of its financial system. In Canada, this
job is carried out by the Bank
of Canada. Unlike a regular financial institution, the Bank of
Canada is not a commercial enterprise running on a profit basis. It
does not provide regular banking services to, or accept deposits from,
the general public. Instead, the Bank of Canada regulates the amount
of currency in circulation and issues bank notes — the money
that consumers and businesses use in their everyday dealings. It also
acts as a banker to the federal government, banks, other central banks
and certain other financial institutions. Economists and financial
professionals watch the Bank of Canada's actions closely, since these
have considerable influence on interest rates, the value of the Canadian
dollar on foreign exchange markets and overall economic activity.
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Forces of change
There are few industries that have undergone as much change in recent
times as financial services. This is shown by the explosion of new
products, services and competitors in the marketplace. The transformation
has been likened to a financial revolution driven by customer needs
and advances in technology. The changing financial habits of consumers
are one example of that transformation. Today's generation of consumers
are opting for higher-risk financial products, putting their money
into mutual funds, stocks and other investment vehicles instead of
traditional savings accounts. Also, many are choosing self-service
(ABMs, on-line banking, etc.) to conduct their financial business
rather than visiting branches or offices. For financial institutions,
telecommunications costs and on-line security risks have declined
significantly in the past 10 years, making it easier to invest in
technology and to deliver services electronically. Many firms can
now, from one location, provide 24-hour access to their services across
the country and around the world. |
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A new framework for the future
As the industry continues to evolve in this era of rapid change and
global competition, it’s difficult to predict what lies ahead. To
ensure that Canada’s financial sector is well positioned for the 21st
century, the federal government recently adopted a new policy framework
consisting of measures to promote the growth of the sector, increase
domestic competition, provide greater protection for consumers and
improve the regulatory environment. The changes include lower entry
requirements for new financial institutions, more flexible ownership
structures, streamlined regulatory processes and improved access to
financial services. (Learn
more about the reforms…)
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Where to
get more information
You can learn more about Canada's financial services sector by contacting
your financial institution, a financial regulator or one of the industry's
trade associations. Check out our links page
for more information. We welcome any questions you may have about
financial services or the role we play in consumer protection and
education. Call our helpline at 1-866-461-3222 or
e-mail
us your question. You can also access more information in
our
Resource Centre.
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